Everus Construction Group, Inc. (NYSE:ECG) Q2 2025 Earnings Call Transcript

Everus Construction Group, Inc. (NYSE:ECG) Q2 2025 Earnings Call Transcript August 13, 2025

Operator: Thank you for standing by. My name is Jordan, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Everus Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I’d now like to turn the call over to Paul Barry, you may begin.

Unidentified Company Representative: Thank you. Welcome to Everus Construction Group’s Second Quarter 2025 Results Conference Call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy. We issued a news release yesterday detailing our second quarter 2025 operational and financial results. This release, together with the accompanying presentation materials are publicly available on our website, at investors.everus.com. I would like to remind you that management’s commentary and responses to questions on today’s conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company’s control. Although these forward- looking statements are based on management’s current expectations and beliefs, actual results could differ materially.

For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday and the appendix of today’s presentation. Today’s call will begin with prepared remarks from Jeff, who will provide a review of our recent business performance, followed by a financial update from Max. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I’ll turn the call over to Jeff.

Jeffrey S. Thiede: Thank you, Paul, and good morning to everyone joining us on the call today. We are very excited to be with you all today as we report our second quarter 2025 results. I will provide a brief overview of our results and highlight some of our key accomplishments against our strategic priorities before I turn it over to Max for his financial review. Beginning with Slide 4. I am very pleased with our results through the first half of the year with our second quarter results further building on our strong first quarter start. Our second quarter revenue increased 31%, driven by continued strength in our Electrical and Mechanical segment as well as improved results in our Transmission and Distribution segment. I am very excited by the continued momentum across many of our key end markets, which positions us well for further strength in the coming quarters.

Our second quarter EBITDA increased 36% on strong revenue growth, combined with solid execution by our team members across the organization. As a result, our EBITDA margins were up 30 basis points from last year. Our total backlog at the end of the second quarter was $3 billion up 24% from the same period last year and up 7% from the end of 2024. We were particularly pleased with the balanced backlog growth across both E&M and T&D as both segments posted solid 20% plus growth relative to last year. We are excited by the strong momentum in our business and continue to see favorable trends driving our growth. Our customers look to Everus as a trusted partner and count on us to perform even the most complex projects, giving us confidence that we are well positioned for continued backlog growth.

We were particularly pleased with the favorable trends in our T&D business during the quarter, while our momentum continues to grow, driven by strong spending plans of many of our key customers. We are seeing strength across the utility end market, notably in our underground submarket. We continue evaluating several opportunities in our pipeline. The need to upgrade and expand power transmission infrastructure in the U.S. is clear given the projected loan growth that is expected in the coming years. And with our long-term customer relationships, and track record of safety, efficiency and project execution, we are well positioned to succeed. We will remain disciplined as we approach some of the larger projects we are pursuing and we are excited about the outlook.

As we look across the rest of our business, we continue to see favorable opportunities in most of our submarkets, including data center and hospitality. As it relates to data center work, our message remains the same. We continue to see very strong demand trends and have not seen any meaningful change in our customers’ plans. We are deeply involved in the long-term planning with many of our key customers, giving us good visibility into the ongoing strength in the data center submarket. Our operating companies are positioned in key geographic locations, which puts us in a favorable position to take advantage of the attractive trends in the data center submarket. We remain well positioned as one of only a small handful of service providers with a track record, expertise and people to successfully execute on these complex jobs.

Now let me shift gears a bit and provide a quick update on some of our key accomplishments during the quarter regarding our 4EVER strategy. During the second quarter, we continued our focus on attracting and retaining key talent. We were able to add to our skilled labor headcount during the quarter, which is critical to supporting our growth objectives and enabled us to generate more than $900 million in revenue during the second quarter for the first time in our history. We had another quarter of excellent execution which once again positively impacted results during the quarter. This is a direct reflection of our hard-working, highly skilled and dedicated employees across the organization. We had favorable variances and project pull forward across several large jobs that were spread across multiple end markets, highlighting the strength and depth of our team.

Our focus on project selection, bidding discipline, training, safety and execution are core to everything we do. We are extremely proud of our track record of superior execution and work every day to maintain our success. As we highlight on Slide 8 of today’s presentation, we expect our 4EVER strategy to drive us toward a long-term financial framework of organic revenue growth in a range of 5% to 7% compounded annually, which combined with our disciplined focus and operational excellence should drive EBITDA growth of 7% to 9% on a compound annual basis. We are confident based on the strength of our recent results, favorable backlog trends and high performance of our team that we will remain on track to successfully execute on our long-term financial targets, delivering more than our long-term framework in 2025, driving value for our shareholders.

With that, I’ll turn it over to Max.

Maximillian J. Marcy: Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter, give an update on our liquidity and balance sheet and wrap up with some details on our guidance. Beginning on Slide 10 in today’s presentation, revenues for the second quarter of 2025 were $921.5 million, an increase of 31% compared to the same period last year. The increase was driven by growth in both segments, with E&M revenue increasing 22% and T&D up 3%. Total EBITDA was $84.2 million during the second quarter, an increase of 36% from the same period last year that was driven by solid revenue growth and increases in segment level margins in both E&M and T&D, including continued strong project execution on a number of projects that we completed, which will not likely repeat in the second half of the year.

Our standup costs continue to trend in line with our expectations for full year run rate incremental costs of $28 million. As a result, our second quarter EBITDA margin was 9.1%, up from 8.8% in the prior year period. At June 30, total backlog was $3 billion, up 24% from June 30, 2024. We saw solid year-over-year growth in both of our segments with E&M backlog up 24% from the prior year period and T&D up 21%. While data center work was once again a key driver, we continue to see solid growth in several key submarkets highlighting the diversity in our business. Given the current mix of our backlog, which includes some larger multiyear projects, many of which are just getting started, our backlog conversion may be extended relative to our historical pattern in the coming quarters.

Our backlog at the end of the second quarter was down modestly from our record first quarter levels. But as we have previously discussed, our backlog can be lumpy quarter-to-quarter. In addition, our second quarter revenues were at record levels and up nearly $100 million from the first quarter. It is also worth noting that we have several larger projects that are either in the preconstruction phase or early stages of construction, and these large projects generally don’t have the full scope of work in backlog at the early stages. This is all to say, given the number of early-stage large projects, combined with our strong competitive positioning and favorable demand drivers, we remain confident in our ability to generate continued backlog growth.

Now, turning to our segment results. Let’s first look at E&M, where our second quarter revenues increased 42% to $713.6 million. The increase was driven by growth across key submarkets with data center once again a key driver. Our E&M EBITDA was $63.7 million in the second quarter, up from $41.5 million in the same period last year or an increase of 53%. The increase was driven by higher revenues and higher gross profit margin due to project timing pull forward and efficiency gains on certain projects as they came to a close, partially offset by changes in project mix and higher SG&A expenses. As a result, our E&M segment EBITDA margin was 8.9%, up 70 basis points compared to 8.2% in the second quarter of 2024. Our second quarter T&D revenues were $212.4 million, up from $206.8 million last year, an increase of 3%, driven by growth in both the transportation and utility end markets.

The transportation end market experienced higher workloads in the traffic signalization submarket while the utility end market had increased activity in a number of submarkets with underground activity leading the way. T&D segment EBITDA increased 19% to $30.4 million in the second quarter, driven primarily by the increase in revenues, together with higher gross profit margin due to project mix and solid project execution. As a result, T&D segment EBITDA margin was 14.3%, up 200 basis points compared to 12.3% in the same period last year. Turning now to our balance sheet and liquidity. As of June 30, we had $64.5 million unrestricted cash and cash equivalents, $292.5 million of gross debt and $209.4 million available under the credit facility, net of $15.6 million of standby letter of the credit.

Net leverage, defined as net debt to trailing 12-month EBITDA was approximately 0.8x. CapEx was $31.6 million during the first half of 2025, up from $16.5 million in the first half last year. The increase in CapEx reflects our strategy to increase investments that support our organic growth, including the purchase of our new prep facility that we discussed last quarter as well as additional vehicles and equipment purchases in T&D to support the growth of our business. Wrapping up with guidance. We are very pleased with our strong first half results, which reflect the attractive demand drivers in our business and our strong competitive positioning as well as excellent project execution and the pull forward of revenues and profits on certain projects.

Based on these factors, combined with our project mix and expected project cadence for the second half of the year, we are raising our 2025 guidance. We are now forecasting revenues in the range of $3 billion to $3.4 billion, which is up from the prior range of $3 billion to $3.1 billion and EBITDA in the range of $240 million to $255 million, up from $210 million to $225 million previously. At the midpoint of our updated range, our revenue and EBITDA forecast represent growth of 18% and 21% adjusted for the incremental stand-alone costs versus last year. Before wrapping up, I want to provide some additional color as it relates to our outlook for the balance of this year. As we have already discussed, we have benefited from some very strong execution during fiscal 2025.

While we always strive to outperform our projected margins, there were several projects where we recognized meaningful upside in the first half. If you adjust for the strong execution that has benefited our results this year, our margins have been relatively consistent in the low to mid-7% range over the past several quarters. We expect this trend to continue for the remainder of the year on solid revenue. Additionally, we will be executing on a higher mix of large jobs that are in the engineering phase or in the early stages of construction during the back half of the year. This makes it more difficult to predict how our workflow will ramp up over the next couple of quarters which impacts our margin visibility. Furthermore, given we were able to pull some jobs forward in the early part of this year at the request of our clients, we had work that was originally slated for the second half that was completed early.

We are working on lining up schedules as we ramp new projects and finalize opportunities with book and burn work, but the timing is tough to predict. Another result of having a higher mix of projects in the early stages is that there are fewer opportunities for significant execution upside in the near term. We are focused on continuing our strong execution and see the potential for additional upside as these jobs progress. This will likely be more of a 2026 event as it relates to these projects that are just getting underway. Again, all of this is to say that while we are encouraged by the trends in our core markets and excited by the momentum in our business and backlog growth, there are several factors impacting the outlook for the second half of the year relative to the first half.

This is nothing more than a timing issue, which is very typical for a business like ours, and we remain confident in our outlook and our ability to deliver on our long-term financial targets. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Brent Thielman from D.A. Davidson.

Brent Edward Thielman: 5 Congrats on a really strong quarter. And I guess my question would be just considering the success you’ve had in hiring that you mentioned, Jeff, through the quarter, and your capability to kind of pull forward some of these projects that you mentioned, maybe if you could just talk about, I guess, your capability going forward to continue to convert the backlog at the rate you’d experienced here through the first half and/or be able to fill some of these holes with kind of more book and burn work. Just be curious around that.

Jeffrey S. Thiede: Yes. Timing is key, Brent. And we get on these projects early and become an extension of the design team, providing our constructability reviews, and sometimes the preconstruction phases are shorter. And therefore, we get moving quicker than anticipated. And that’s what happened in the second quarter as far as the pull-forward work, which resulted in record revenues for our company. We’re always looking at planning our resources and allocating resources and staying ahead so we continue to build our business, support our growth and also anticipate where we have to add headcount. And we’re at record employment today, and we’ll continue to add people, train people and support the continued growth. But timing is key on these projects. Sometimes they’re difficult to anticipate, but we’re well positioned. We’re partners on many of our projects, especially the large-scale projects, and we think this is a strength of our business.

Operator: Your next question comes from the line of Ian Zaffino from Oppenheimer.

Ian Alton Zaffino: I just wanted to ask, if I could just squeeze in 2 here. I know you called out weather last quarter but not this quarter. So I was wondering if there was a weather impact at all in T&D. And then also in commercial, can you just talk about hospitality and how that did? And what’s sort of the outlook for that? I know we had a little bit of a trough previously, are we coming out of that? And when do we start to see some contribution from hospitality?

Jeffrey S. Thiede: Well, first part of your question on weather, we didn’t really have any weather impacts in the second quarter. And in Las Vegas, hospitality work. We saw an uptick in our backlog. We’ve got 4 great companies in Las Vegas. We do electrical, low-voltage, mechanical plumbing HVAC fire protection underground services. So we are very well positioned with a fantastic reputation to be able to execute large, complex projects in Vegas. So we’ve seen an uptick, we haven’t seen it return to 2022, 2023, where we had a robust construction on major projects where we were very successful. Nevertheless, with the reputation we have, the experience and the relationships, we continue to be well positioned to capture this work.

Operator: Your next question comes from the line of Peter Englert from Wolfe Research.

Peter Russell Englert: This is Peter on for Chris Senyek. Congrats on the strong quarter. You guys noted that gross margins benefited from efficiency gains this quarter. To what were those tied to the prefab investments, investments you’ve made versus factors like project execution or mix? And how should we be thinking about the sustainability of those kind of going into the back half of the year?

Jeffrey S. Thiede: Prefab certainly does help with our company’s being able to execute. It also helps with us getting work. Our customers come into our prefab facilities and give us feedback. And the feedback is very positive, yet we never rest on our laurels when it comes to prefab outside manufacturing. When we get the benefit of safety, of course, in production being in a controlled environment. It also helps with reducing congestion on our job sites, not only helps us, but it helps other trades and also gives us an advantage to be able to bring those schedules in and make those projects delivered sooner. And we established this prefab initiative many years ago, and we’ve vastly improved our processes and our output to support the production and the safety and schedule, as I just mentioned.

We’re going to continue to invest in prefab facilities with our operating companies last quarter. And Max’s opening comments and referred to the expansion of our prefab in the Midwest. We go through our strategic planning process with our operating companies to be able to support prefab and it is a contributing factor. The other factors are planning, executing, procurement and then delivery of production safely in the field. And our teams are really good at that. We can’t always forecast for write-ups and upside, but we drive towards that, and we’ll continue to have that goal of margin uplift on our projects going forward.

Operator: Your next question comes from the line of Brian Brophy from Stifel Financial Corp.

Brian Daniel Brophy: Congrats on a nice quarter. Just a question on book-to-bill. Obviously, it was a little bit below 1 this quarter. Is there anything notable to call out that’s driving? Are you seeing any sort of change in the demand environment outside of data centers? Or is this more of a reflection of lumpiness of awards?

Jeffrey S. Thiede: I think, Brian, it’s more of a reflection of the lumpiness of our backlog, and we’re very close to where we ended up on the prior quarter. As far as our backlog, we had pulled forward, and that contributed to record revenue for the quarter. And Q2 is our second largest backlog in our history and was a Q2 record. So it’s timing and project positioning, it’s resource availability. And if you take a look at our year-to-date book-to-bill, it’s 1.1. So we’re really excited about our ability to be able to get additional backlog to be able to support our growth.

Brian Daniel Brophy: That’s helpful. And then in some of your opening comments, you mentioned some activity around large projects in T&D, which seems kind of a unique change of trend relative to historical. I guess just any more color on what you’re seeing from a large project perspective on the T&D side?

Jeffrey S. Thiede: Yes. We’re bidding on projects in the T&D space all the time, and we always go through a disciplined project selection process, and we look for those opportunities that a good fit for our teams and our talent. We are very selective in the types of projects that we pursue. And of course, it comes down to resource availability and timing. We have an excellent reputation to be able to deliver underground and aboveground distribution mission. And our T&D segment is a very important part of our business. We see backlog growth in the quarter and the opportunity to be able to execute and be able to build upon the T&D segment of our business.

Brian Daniel Brophy: And then just thinking about growth rates in the back half by each segment, anything notable to call out as we should think about adjusting our models, electromechanical versus T&D from a growth perspective in the back half?

Maximillian J. Marcy: Yes. Brian, this is Max. So I think if you think about the growth rates we’ve experienced thus far this year, right, I think we’ve had some pull forward. So I think we’ve had some good solid growth rates. I think based on our guidance in the back half of the year, you could see maybe those growth rates would be tempered. I think that was kind of always — we always had a very soft first half in 2024. So we have tougher comps as we go forward here. So some of that pull forward will cause the growth rate to be a little bit down. I would say on balance, you should see T&D to continue at about the rate that it has with E&M probably maybe growing outside of T&D.

Operator: Your final question comes from the line of Brent Thielman from D.A. Davidson.

Brent Edward Thielman: Jeff, maybe just kind of bigger picture several months now since the spin and being a public company. I know you’re hiring at corporate. Maybe you could just talk about the pipeline you may be cultivating. I know organic growth was one part of the kind of equation as we look out a few years. How does that pipeline look? And any sort of sense for when we can start to see transactions pick up?

Jeffrey S. Thiede: Yes. As far as our corporate team, we’re very proud of building this team and be able to stand on our own as a publicly traded company. It’s gone very, very well. The team is very talented, a lot of experience, and we’ve had a lot of success and good talent. As far as pipeline for M&A, we’re looking at quite a few opportunities. We have an expansion of our opportunity list and that’s largely due to the hiring of Tim Snevis, who joined Everus as Vice President of Corporate Development and Strategy. We’re excited about his expertise, his reputation and track record. And that’s going to help us continue to look for companies that have high integrity and get awarded work due to best value, have a commitment to safety and operations and are respected within their communities. So we see a lot of opportunities out there, and we’re pursuing the best ones that fit our company to give us the geographic expansion that we’re looking for.

Maximillian J. Marcy: I think I’d just add, Brent, obviously, our leverage continues to tick down as we grow our revenue and our EBITDA. But we want to find the right opportunity, right? So we’re focused on growing this business and expanding this business. And know if we find the right opportunity for inorganic growth, we’ll take a look at that. But we definitely see good opportunities to continue to grow this business organically and continue to add to our backlog in the operating companies and the geographies that we currently operate.

Brent Edward Thielman: Okay. Max, maybe if I could sneak one more on — the question on cash flow. Just kind of looking back and typically through the first half, you’ve got some commitment in working capital, presumably for these projects. And I was just trying to think about as you’re ramping up on some of these larger projects, should we think that’s a drain on your cash flow in the second half? Or are you still feeling pretty good about your ability to convert more cash here as you work through the second half of the year?

Jeffrey S. Thiede: We’re still feeling pretty good about our ability to convert cash in the back half of the year. I think some of these projects are getting started, and that’s part of the increase in working capital into the second quarter here. So as those projects get ramped, build, I think we feel good about our ability to continue to generate cash. I think we — I think our free cash flow is pretty consistent with historical patterns first and second quarter. So obviously, we saw a nice change from first to second. So we feel pretty good as the year here is going to progress here.

Operator: That concludes the Q&A session. I’d now like to turn the call back over to Jeff Thiede for closing remarks.

Jeffrey S. Thiede: Thank you, operator, and thank you all again for joining us today. We are very excited about the opportunities ahead for Everest and are confident that we have the right strategy in place and the right team to execute on our plan. We will be attending several investor events during the quarter including the D.A. Davidson Diversified Industrial and Services Conference in Nashville during September. If we are not able to connect during the quarter, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and interest in Everus. This concludes today’s call.

Operator: This concludes the meeting. You may now disconnect.